Suppose that the index model for stocks A and B is estimated from excess returns with the following results:

R_A = 1.8% + 0.75R_M + e_A

R_B = 2% + 1.1R_M + e_B

_M = 23%; R-square_A = 0.18; R-square_B = 0.10

Assume you create portfolio P with investment proportions of 0.60 in A and 0.40 in B.

1. What is the standard deviation of the portfolio? (Do not round your intermediate calculations. Round your answer to 2 decimal places.)

Standard deviation %

2. What is the beta of your portfolio? (Do not round your intermediate calculations. Round your answer to 2 decimal places.)

Portfolio beta

3. What is the firm-specific variance of your portfolio? (Do not round your intermediate calculations. Round your answer to 4 decimal places.)

Firm-specific

4. What is the covariance between the portfolio and the market index? (Do not round your intermediate calculations.Round your answer to 3 decimal places.)

Covariance